CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Final Order Nos. 21005 - 21008 / 2014 Application(s) Involved: E/Stay/20625/2014, E/Stay/20626/2014, E/Stay/20627/2014, E/Stay/20628/2014 in E/20639/2014, E/20640/2014, E/20641/2014, E/20642/2014-DB Appeal(s) Involved: E/20639/2014, E/20640/2014, E/20641/2014, E/20642/2014-DB [Arising out of Order-in-Original No. 60/2013 dated 22/11/2013 passed by the Commissioner of Central Excise , Bangalore-I ] M. Pitchiah, Director (Finance) BEML Ltd. KGF Complex, BEML Nagar Post, KGF, BEML Nagar Kolar - 563 115 Karnataka Appellant(s) M. Pradeep Swaminathan Executive Director-Finance, BEML Ltd. Appellant(s) BEML Ltd. Appellant(s) A.K Halder Executive Director Marketing, BEML Ltd. Appellant(s) Versus Commissioner of Central Excise, Customs and Service Tax Bangalore-I Post Box No. 5400, CR Buildings, Bangalore - 560 001 Karnataka Respondent(s) Appearance: Mr. G. Shivadass, Advocate Lakshmi Kumaran & Sridharan World Trade Centre No.404-406, 4th Floor, South Wing Brigade Gateway Campus No.26/1, Dr. Rajkumar Road, Bangalore - 560 055 Karnataka For the Appellant Mr. A.K. Nigam, AR For the Respondent CORAM: HON'BLE SHRI B.S.V. MURTHY, TECHNICAL MEMBER HON'BLE SHRI S.K. MOHANTY, JUDICIAL MEMBER Date of Hearing: 16/06/2014 Date of Decision: 16/06/2014 Order Per: B.S.V. MURTHY The appellants are a Public Sector Undertaking inter alia engaged in the manufacture of Bull Dozers, Shovels, Excavators, Loaders etc. falling under Chapter 84 of the First Schedule to the Central Excise Tariff Act, 1985. The marketing division of the appellants started functioning in the year April, 2010 in order to cater to the needs of their customers who procured the Bull Dozers, Shovels, Excavators, Loaders and other equipments from their KGF (Manufacturing) Unit. Based on the requirement of their customers the appellants procure the spare parts either locally or through import. The spare parts are cleared either directly to the customers based on the purchase orders or stock transferred to the Regional Offices of the appellants for supply to the customers based on their requirements. The value adopted for sale of spare parts from the Marketing Division of the appellants is based on the price list available/generated in the ERP system and no separate price list is available for the same. However, after May, 2012 the system generated STO prices are considered in case of stock transfer to regional/district offices from where the goods are sold to the customers. The appellants treated the above said activity as an activity not amounting to manufacture and hence, no duty is paid on the spare parts and further no credit is availed or passed on to the customers in respect of those spares/parts. Further all the spare parts are cleared to the industrial and institutional consumers only.

2. Investigation was taken up and appellants premises were visited and statements were recorded from the 3 employees of the appellant who are in appeal before us. The appellants furnished all the details required and there was correspondence between the appellants and the investigating agency of the Revenue. Further the appellants for the normal period also paid an amount of Rs. 44 crores towards central excise duty for the period from 01.04.2011 to 31.03.2013. However show-cause notice was issued on the ground that the appellant is liable to pay central excise duty from 29.04.2010 to 31.03.2011 which they had not paid till the date. Show-cause notice was issued on 22.04.2013.

3. Heard both the sides.

4. We find that the issue involved in the present case is whether activity of repacking/relabelling of spare parts amounts to manufacture. There is no dispute on the fact that because of the retrospective amendment given to the notification issued in the year 2011 by the Finance Act 2011, the activity of repacking/relabelling amounted to manufacture. The submission of the appellant is that the show-cause notice could not have been issued beyond the period prescribed under Section 11A and no suppression of fact could have been invoked. This is because while the parts became liable to duty on the basis of MRP, the activity of repacking/relabelling did not become manufacture at the same time and retrospective amendment was brought about for this purpose. Even though retrospective amendment was brought about in the year 2011 itself, the department has issued the show-cause notice beyond the normal period. The learned counsel relies upon the decision in the case of J.K. Spinning and Weaving Mills Ltd. and another Vs. Union of India and others [1987 (32) E.L.T. 234 (S.C)] wherein the retrospective amendment brought about in respect of Rules 9 and 49 of Central Excise Rules 1944 was considered. The relevant paragraphs are 29 to 33 and 35-36 and the same are reproduced below: 29. It is not disputed that the Legislature is competent to make laws both prospectively and retrospectively. But, as pointed out by this Court in Jawaharmal V. State of Rajasthan and Others, (1966) 1 S.C.R. 890, the cases may conceivably occur where the court may have to consider the question as to whether excessive retrospective operation prescribed by a taxing statute amounts to the contravention of the citizens fundamental rights; and in dealing with such a question the court may have to take into account all the relevant and surrounding facts and circumstances in relation to the taxation. Again in Rai Ramkrishna and Others V. State of Bihar, (1964) 1 S.C.R. 897 this Court has pointed out that if the retrospective feature of a law is arbitrary and burdensome, the statue will not be sustained and the reasonableness of each retrospective statute will depend on the circumstances of each case; and the test of the length of time covered by the retrospective operation cannot, by itself, necessarily be a decisive test.

30. The apprehension of the appellants is that the amendments to Rules 9 and 49 having been made retrospective from the date of the Rules were framed, that is, from February 28, 1944, the appellants and others similarly situated may be called upon to pay enormous amounts of the duty in respect of intermediate goods which have come into existence and again consumed in the integrated process of manufacture of another commodity. There can be no doubt that if one has to pay duty with retrospective effect from 1944, it would really cause great hardship but, in our opinion, in view of Section 11A of the Act, there is no cause for such apprehension. Section 11A(1) of the Act provides as follows:- Section 11A (1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, a Central Excise Officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any willful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this sub-section shall have effect, as if for the words six months, the words five years were substituted. Explanation - Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of six months or five years, as the case may be.

31. Under Section 11A(1) the Excise authorities cannot recover duties not levied or not paid or short-levied or short-paid or erroneously refunded beyond the period of six months, the proviso to Section 11A not being applicable in the present case. Thus although Section 51 of the Finance Act, 1982 has given retrospective effect to the amendments of Rules 9 and 49, yet it must be subject to the provision of Section 11A of the Act. We are unable to accept the contention of the learned Attorney General that as Section 51 has made the amendments retrospective in operation since February 28, 1944, it should be held that it overrides the provision of section 11a. If the intention of the Legislature was to nullify the effect of Section 11A, in that case, the Legislature would have specifically provided for the same. Section 51 does not contain any non-obstante clause, nor does it refer to the provision of section 11a. In the circumstances, it is difficult to hold that Section 51 overrides the provision of section 11a.

32. It is, however, contended by the learned Attorney General that as the law was amended for the first time on February 20, 1982, the cause of action for the Excise authorities to demand Excise duty in terms of the amended provision, arose on that day, that is, on February 20, 1982 and, accordingly, the authorities are entitled to make such demand with retrospective effect beyond the period of six months. But such demand, though it may include within it demand for more than six months, must be made within a period of six months from the date of the amendment.

33. There is no provision in the Act or in the Rules enabling the Excise authorities to make any demand beyond the periods mentioned in Section 11A of the Act on the ground of the accrual of cause of action. The question that is really involved is whether in view of Section 51 of the Finance Act, 1982, Section 11A should be ignored or not. In our view Section 51 does not, in any manner, affect the provision of Section 11A of the Act. In the absence of any specific provision overriding Section 11A, it will be consistent with rules of harmonious construction to hold that Section 51 of the Finance Act, 1982 insofar as it gives retrospective effect to the amendments made to rules 9 and 49 of the rules, is subject to the provision of section 11a.

35. We may now deal with the challenge made to the retrospective operation of amendments of Rules 9 and 49 on another ground. In order to appreciate the ground of such challenge, we may once more refer to Section 51 of the Finance Act, 1982. The Explanation to Section 51 provides as follows:- Explanation For the removal of doubts, it is hereby declared that no act or omission on the part of any person shall be punishable as an offence which would not have been so punishable if this section had not come into force. Under the Explanation, although Rules 9 and 49 have been given retrospective effect, an act or omission which was not punishable before the amendment of the Rules, will not be punishable after amendment. The Explanation does not, however, provide for the penalties and confiscation of goods. It is the contention of the appellants that as the appellants had not complied with the requirements of the amended Rules 9 and 49, they would be subjected to penalties and their goods would be confiscated under the amended rules 9 and 49 read with rule 173q of the rules with retrospective effect. It is, accordingly, submitted on behalf of the appellants that the amendment of these two rules with retrospective effect is arbitrary and unreasonable and should be struck down as violative of Article 14 of the Constitution.

36. Attractive though the argument is, we regret we are unable to accept the same. It is true that the Explanation to Section 51 has not mentioned anything about the penalties and confiscation of goods, but we do not think that in view of such non-mention in the Explanation excluding imposition of penalties for acts or omissions before amendment, such penalties can be imposed or goods can be confiscated by virtue of the amended provision of rules 9 and 49. It will be against all principles of legal jurisprudence to impose a penalty on a person or to confiscate his goods for an act or omission which was lawful at the time when such act was performed or omission made, but subsequently made unlawful by virtue of any provision of law. The contention made on behalf of the appellants is founded on the assumption that under the Explanation to Section 51, the penalties can be imposed and goods can be confiscated with retrospective effect. In the circumstances, the challenge to the amendments of Rules 9 and 49, founded on the provision of the Explanation to Section 51 of the Finance Act, 1982, is without any substance and is rejected.

5. We find that as per the above decision, the demand has to be within the period prescribed under Section 11A. In this case it cannot be said that appellants had suppressed the facts or deliberately mis-declared to evade payment of duty and in our opinion no case has been made out for invoking extended period. In the absence of case for invoking extended period, the demand for the period beyond the normal period of limitation cannot be sustained. Since the issue falls within a narrow compass and the issue is no longer res integra, we do not consider it appropriate to postpone the matter for final hearing and grant stay at this stage. Learned AR also agrees that the issue is covered by the decision of the Honble Supreme Court. In view of the above all the appeals are allowed with consequential relief, if any, to the appellants. (Operative portion of the order has been pronounced in open court on 16.06.2014) (S.K. MOHANTY) JUDICIAL MEMBER (B.S.V. MURTHY) TECHNICAL MEMBER iss